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BasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn1Chapter11CustomerService,LogisticsandDistributionBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn2LogisticsandPhysicalDistributionCustomerServiceThetransportingandstoringofgoodstomatchtargetcustomers'needswiththeorganisation’smarketingmixBothwithinindividualorganisationsandalongachannelofdistributionCustomersthinkofphysicaldistributionintermsofthecustomerservicelevel—howrapidlyanddependablyacompanycandeliverwhatthecustomerwantsTherearetrade-offsamongphysicaldistributioncosts,customerservicelevelsandsalesBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn3Trade-offsAmongPhysicalDistributionCosts,CustomerServiceLevel,andSalesTotalcostofphysicaldistributionInventorycostLostsalesTransportingcostCustomerServiceLevel(%ofcustomersservedwithinsometimeperiod—say4days)090%0Cost($)BasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn4CoordinationofPhysicalDistributionActivitiesAlltransportingstoringandproduct-handlingactivitiesofanorganisationandachannelsystemshouldbecoordinatedasonesystemto:—minimisethecostsofdistribution—foragivencustomerservicelevelSimplyfocusingonindividualcostsmayincreasetotalcosts—sinceatotalsystemisinvolvedRequiresthatthemanagerdecidewhataspectsofservicearemostimportanttocustomers—Examples:orderdeliverytime,availabilityofproducts,orderstatusinformationBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn5ExamplesofFactorsthatAffectPhysicalDistributionServiceLevel(A)AdvanceinformationonproductavailabilityTimetoenterandprocessordersBackorderproceduresWhereinventoryisstoredAccuracyinfillingordersDamageinshipping,storingandhandlingOrderstatusinformationBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn6ExamplesofFactorsthatAffectPhysicalDistributionServiceLevel(B)AdvanceinformationondelaysTimeneededtodeliveranorderReliabilityinmeetingdeliverydateComplyingwithcustomer’sinstructionsDefect-freedeliveriesHowneededadjustmentsarehandledProceduresforhandingreturnsBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn7TheChainofSupplyThecompletesetoforganisations,facilitiesandlogisticactivitiesinvolvedinprocuringmaterials,transformingthemintointermediateandfinishedproductsanddistributingthemJust-in-timedelivery—reliablygettingproductstherejustbeforethecustomerneedsthem—requiresclosecoordinationandinformationflows—reduceshandlingcosts—reducesstoringcosts—shiftsgreaterresponsibilitytothesupplier—asmallproblemcancausebigeffectsElectronicdatainterchange(EDI)putsinformationinastandardisedformateasilysharedbetweendifferentcomputersystemsBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn8TransportingMarketingfunctionofmovinggoodsHelpsfacilitateeconomiesofscaleinproducinggoods—produceinlargequantitieswhereitisinexpensivetoproduce,andthenshipproductstocustomersChoiceoftransportationaffectscustomersatisfactionintermsof:—pricingofproduct—on-timedeliveryperformance—conditionofgoodsondeliveryBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn9ChoiceofTransportationModesFivemajormodesoftransportation:—Rail—Truck(road)—Water—Air—PipelineChoiceoftransportationmodedependson:—Cost—Deliveryspeed—Numberoflocationsserved—Abilitytohandleavarietyofgoods—Frequencyofscheduledshipments—DependabilityinmeetingschedulesBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn10TheStoringFunctionThemarketingfunctionofholdinggoodstoprovidetimeutilityInventoryistheamountofgoodsbeingstoredGoodsarestoredatacostBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn11ExamplesofStoringCostsWarehouseexpenseCapitalneededtopayforinventoryProductdamageLossesduetotheftObsolescenceBasicMarketingAManagerialPerspective3rdAustralasianeditionCopyright©2001McGraw-HillBookCompanyAustraliaPtyLtdMcCarthyetal.‘BasicMarketing’3rdAustedn12SpecialisedStorageCharacteristicsTypeofWarehousePrivatePublicFixedinvestmentVeryhighNofixedinvestmentUnitcostHighifvolumeislowVerylowifvolumeisveryhighLow:chargesaremadeonlyforspaceneededControlHighLow